Question

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Q.9: L, M and N were partners in a firm sharing profits in the ratio 2:3:5. From
Ist April, 2018 they decided to share the profits in the ratio of 1:2:2. On this date
the Balance Sheet showed a credit balance of Rs 1,17,000 in general reserve and
debit balance of Rs 35,000 in Profit & Loss account. The goodwill of the firm is
valued at Rs 5 lakh. Profit arising out of revaluation is Rs 30,000. Pass journal
entries for the above transections on the reconstitution of the firm. (2)​

Answer 1

Answer:

To get the adjustment entry done, first need to find out the distribution of accumulated profit /loss. Since books of account are not to be affected due to change in profit sharing ratio , hence an adjustment entry need to be passed:

Below are the accumulated profits need to be distributed:

Particulars Book Value

Profit & Loss A/c 15000

General Reserve 60000

Advertising Suspense A/c 30000

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Total Surplus 105000

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Share in Accumulated Profits: A B C

As per old Ratio 52500 31500 21000

As per New Ratio 21000 31500 52500

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(Sacrifice)/Gain (31500) NIL 31500

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Hence below adjustment entry will be passed:

C's Capital A/c Dr. 31500

To A's Capital A/c 31500